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    December 7, 2021

    Three ‘wishes’ for a Better Michigan Constitution for Counties

    This article appeared in the Michigan Counties magazine published by the Michigan Association of Counties

    My friend Steve Currie at the MAC recently appeared in my dreams in the form of the Genie in Disney’s Aladdin movies.  

    If my dream was not weird enough already, Genie said he could grant any of my policy wishes as long as they would make life better for Michigan counties and their constituents. Here’s what I told him. 

    First, I would remove all references to the sales tax from the state constitution. In provisions you’ll not find in other state constitutions, Section 8 of Article 9 in the Michigan Constitution dictates the tax rate and Sections 10 and 11 dictate use of the revenue for state revenue sharing and for school funding. 

    Dual problems arise from these provisions. By capping the state sales tax rate, the constitution has effectively precluded policymakers from authorizing local-option sales taxes. Additionally, the constitutional earmarking of the tax revenue has created restrictions on the use of revenues. Even if local-option sales taxes were allowed, the current earmarking provisions would mean that more than three-quarters of the revenues would go to municipal governments and schools outside of the county.  

    A local-option sales tax would allow geographically and economically diverse regions to benefit from the economic activity that makes them unique, such as tourism along the lake shores or commerce in our urban areas. Without this municipal financing option, a very heavy burden falls to Michigan’s property tax to pay for essential government services. Michigan is one of only 13 states without local-option sales taxes. 

    My next wish would be to delete the provisions of Article 9, Section 31 related to Headlee tax rate rollbacks. These are “automatic” rate reductions that must take place when the growth of a county’s total property tax base exceeds inflation. It became superfluous when the 1994 school finance reform created taxable value to replace state equalized value as the tax base.  

    In our current system, property tax revenues have three paths to growth: 1) market appreciation; 2) the windfall that occurs when a property is sold and the taxable values “pop up” to state equalized value; and 3) new development (i.e., new subdivisions). Appreciation is limited to the rate of inflation and the pop ups cause tax rate rollbacks for all properties in the jurisdiction. Our recent report shows how this dynamic kept tax revenue growth for some local governments below inflation. The only solutions are to increase tax rates or chase new development. That is not a recipe for sustaining government services, especially for those communities with little to no new land to develop. 

    Next, my wish would be to take some of the specifics of county organization out of the constitution. State law has evolved since adoption of the 1963 Constitution to permit charter and the optional-unified forms of county government. Those that haven’t gone this route often have empowered county administrators to manage the day-to-day operations of the counties. The constitutional protection of the offices of sheriff, clerk, treasurer, register of deeds, and prosecuting attorney creates undue friction in management of operations, especially when funding is less than plentiful.  

    Counties are well-positioned to do more to serve citizens and their constituent local governments effectively and efficiently. However, there are several structural obstacles (some that have outlived their usefulness) created by state law that stand in the way of counties realizing their full potential.

    Granting these wishes would help them achieve that mission.

    President

    About The Author

    Eric Lupher

    President

    Eric has been President of the Citizens Research Council since September of 2014. He has been with the Citizens Research Council since 1987, the first two years as a Lent Upson-Loren Miller Fellow, and since then as a Research Associate and, later, as Director of Local Affairs. Eric has researched such issues as state taxes, state revenue sharing, highway funding, unemployment insurance, economic development incentives, and stadium funding. His recent work focused on local government matters, including intergovernmental cooperation, governance issues, and municipal finance. Eric is a past president of the Governmental Research Association and also served as vice-chairman of the Governmental Accounting Standards Advisory Council (GASAC), an advisory body for the Governmental Accounting Standards Board (GASB), representing the user community on behalf of the Governmental Research Association.

    Three ‘wishes’ for a Better Michigan Constitution for Counties

    This article appeared in the Michigan Counties magazine published by the Michigan Association of Counties

    My friend Steve Currie at the MAC recently appeared in my dreams in the form of the Genie in Disney’s Aladdin movies.  

    If my dream was not weird enough already, Genie said he could grant any of my policy wishes as long as they would make life better for Michigan counties and their constituents. Here’s what I told him. 

    First, I would remove all references to the sales tax from the state constitution. In provisions you’ll not find in other state constitutions, Section 8 of Article 9 in the Michigan Constitution dictates the tax rate and Sections 10 and 11 dictate use of the revenue for state revenue sharing and for school funding. 

    Dual problems arise from these provisions. By capping the state sales tax rate, the constitution has effectively precluded policymakers from authorizing local-option sales taxes. Additionally, the constitutional earmarking of the tax revenue has created restrictions on the use of revenues. Even if local-option sales taxes were allowed, the current earmarking provisions would mean that more than three-quarters of the revenues would go to municipal governments and schools outside of the county.  

    A local-option sales tax would allow geographically and economically diverse regions to benefit from the economic activity that makes them unique, such as tourism along the lake shores or commerce in our urban areas. Without this municipal financing option, a very heavy burden falls to Michigan’s property tax to pay for essential government services. Michigan is one of only 13 states without local-option sales taxes. 

    My next wish would be to delete the provisions of Article 9, Section 31 related to Headlee tax rate rollbacks. These are “automatic” rate reductions that must take place when the growth of a county’s total property tax base exceeds inflation. It became superfluous when the 1994 school finance reform created taxable value to replace state equalized value as the tax base.  

    In our current system, property tax revenues have three paths to growth: 1) market appreciation; 2) the windfall that occurs when a property is sold and the taxable values “pop up” to state equalized value; and 3) new development (i.e., new subdivisions). Appreciation is limited to the rate of inflation and the pop ups cause tax rate rollbacks for all properties in the jurisdiction. Our recent report shows how this dynamic kept tax revenue growth for some local governments below inflation. The only solutions are to increase tax rates or chase new development. That is not a recipe for sustaining government services, especially for those communities with little to no new land to develop. 

    Next, my wish would be to take some of the specifics of county organization out of the constitution. State law has evolved since adoption of the 1963 Constitution to permit charter and the optional-unified forms of county government. Those that haven’t gone this route often have empowered county administrators to manage the day-to-day operations of the counties. The constitutional protection of the offices of sheriff, clerk, treasurer, register of deeds, and prosecuting attorney creates undue friction in management of operations, especially when funding is less than plentiful.  

    Counties are well-positioned to do more to serve citizens and their constituent local governments effectively and efficiently. However, there are several structural obstacles (some that have outlived their usefulness) created by state law that stand in the way of counties realizing their full potential.

    Granting these wishes would help them achieve that mission.

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    By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact
    President

    About The Author

    Eric Lupher

    President

    Eric has been President of the Citizens Research Council since September of 2014. He has been with the Citizens Research Council since 1987, the first two years as a Lent Upson-Loren Miller Fellow, and since then as a Research Associate and, later, as Director of Local Affairs. Eric has researched such issues as state taxes, state revenue sharing, highway funding, unemployment insurance, economic development incentives, and stadium funding. His recent work focused on local government matters, including intergovernmental cooperation, governance issues, and municipal finance. Eric is a past president of the Governmental Research Association and also served as vice-chairman of the Governmental Accounting Standards Advisory Council (GASAC), an advisory body for the Governmental Accounting Standards Board (GASB), representing the user community on behalf of the Governmental Research Association.

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